On February 12, 2009, the U.S. Court of Appeals for the Seventh Circuit issued a decision in Hecker v. Deere Company, Nos. 07-3605 & 08-1224, affi rming dismissal of a complaint alleging that the fi duciaries of two 401(k) plans sponsored by Deere violated ERISA. The ruling is the fi rst signifi cant appellate decision in a recent wave of ERISA lawsuits brought by plan participants against large companies and their 401(k) plans. In general, these lawsuits allege that the plan sponsors breached their fi duciary duties under ERISA by paying excessive fees to 401(k) service providers and by failing to adequately disclose fee information to plan participants. The Seventh Circuit’s ruling is important because it clearly rejects several of the theories advanced by plaintiffs in these cases, many of which are currently pending in federal courts throughout the country.


Background Facts

Deere offered its employees the opportunity to participate in two company-sponsored 401(k) plans. In 1990, Deere and Fidelity Management Trust Company (“Fidelity Trust”) entered into a contract under which Fidelity Trust served as trustee for the plans. Another unit of Fidelity, Fidelity Management and Research Company (“Fidelity Research”), acted as investment advisor for the plans’ mutual funds. Deere, as plan administrator, retained fi nal authority to select the investment options for the plans.

Both of the Deere-sponsored plans offered participants a broad choice of investment options, including 23 Fidelity mutual funds, two investment funds managed by Fidelity Trust, a fund devoted to Deere’s stock, and a Fidelity-operated facility called “BrokerageLink,” which gave participants access to approximately 2,500 additional funds managed by different companies. Participants had control over their investments in the plans, subject to the limitation that the investment vehicle had to be one that the plans offered. Each available fund was subject to a variety of fees charged against the assets held within the mutual fund, calculated as a percentage of assets.


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